2,000 Flights Were Cancelled Since Christmas Eve Due To Staff Shortages
The energy complex is drifting lower so far this morning in what looks to be a quiet week for futures trading. Stranded between two holidays, this week’s price action will likely be inconsequential as attention has already shifted to next week’s OPEC+ meeting where Cartel’n’Friends will decide if they’ll go ahead with a 400 thousand barrel per day production increase in February. The American crude oil benchmark leads the way lower this morning, shaving nearly 80 cents off the prompt month contract, while gas and diesel trail behind with ~1 ½ cent losses.
It was a rough weekend for airlines: over 2,000 flights were cancelled since Christmas Eve due to staff shortages. The mild-but-contagious Omicron variant drove the increase in air travel workers calling in sick. While only 50 flights scheduled for today have been cancelled, there are no clear indications when air travel will return to ‘normal’, whatever that is.
Baker Hughes reported an addition of seven oil rigs last week, bringing the total active production platforms in the US to 586. Last year’s recovery rally in oil prices continue to drive decision making when it comes to flipping the ‘on’ switch: 9 out of the last 10 weeks have seen a net increase in operating production sites.
The Commitment of Traders report is delayed due to last week’s holiday and will be released today at 2:30 pm CST.
ExxonMobil reported an explosion and resulting fire at its 584mbd Baytown refinery early Thursday morning. Gulf coast gasoline basis values drifted higher (in a muted fashion) once it was discovered that the unit affected by the accident processes gasoline components. Four workers were injured.
Click here to download a PDF of today's TACenergy Market Talk.
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View AllThe Energy Bulls Are On The Run This Morning, Lead By Heating And Crude Oil Futures
The energy bulls are on the run this morning, lead by heating and crude oil futures. The November HO contract is trading ~7.5 cents per gallon (2.3%) higher while WTI is bumped $1.24 per barrel (1.3%) so far in pre-market trading. Their gasoline counterpart is rallying in sympathy with .3% gains to start the day.
The October contracts for both RBOB and HO expire today, and while trading action looks to be pretty tame so far, it isn’t a rare occurrence to see some big price swings on expiring contracts as traders look to close their positions. It should be noted that the only physical market pricing still pricing their product off of October futures, while the rest of the nation already switched to the November contract over the last week or so.
We’ve now got two named storms in the Atlantic, Philippe and Rina, but both aren’t expected to develop into major storms. While most models show both storms staying out to sea, the European model for weather forecasting shows there is a possibility that Philippe gets close enough to the Northeast to bring rain to the area, but not much else.
The term “$100 oil” is starting to pop up in headlines more and more mostly because WTI settled above the $90 level back on Tuesday, but partially because it’s a nice round number that’s easy to yell in debates or hear about from your father-in-law on the golf course. While the prospect of sustained high energy prices could be harmful to the economy, its important to note that the current short supply environment is voluntary. The spigot could be turned back on at any point, which could topple oil prices in short order.
Click here to download a PDF of today's TACenergy Market Talk.
Gasoline And Crude Oil Futures Are All Trading Between .5% And .8% Lower To Start The Day
The energy complex is sagging this morning with the exception of the distillate benchmark as the prompt month trading higher by about a penny. Gasoline and crude oil futures are all trading between .5% and .8% lower to start the day, pulling back after WTI traded above $95 briefly in the overnight session.
There isn’t much in the way of news this morning with most still citing the expectation for tight global supply, inflation and interest rates, and production cuts by OPEC+.
As reported by the Department of Energy yesterday, refinery runs dropped in all PADDs, except for PADD 3, as we plug along into the fall turnaround season. Crude oil inventories drew down last week, despite lower runs and exports, and increased imports, likely due to the crude oil “adjustment” the EIA uses to reconcile any missing barrels from their calculated estimates.
Diesel remains tight in the US, particularly in PADD 5 (West Coast + Nevada, Arizona) but stockpiles are climbing back towards their 5-year seasonal range. It unsurprising to see a spike in ULSD imports to the region since both Los Angeles and San Francisco spot markets are trading at 50+ cent premiums to the NYMEX. We’ve yet to see such relief on the gasoline side of the barrel, and we likely won’t until the market switches to a higher RVP.